Dynamic supply chain coordination under consignment and vendor-managed inventory in retailer-centric B2B electronic markets

a r t i c l e i n f o This study examines the dynamic performance of vertically decentralized two-echelon channel coordination for deteriorating goods under consignment and vendor-managed inventory (VMI) contracts with revenue sharing from retailer-centric business-to-business transactions in both traditional markets and electronic markets (EMs). The research presents the profit-maximization problem and devises a method for making cross-enterprise dynamic joint decisions by combining calculus with dynamic programming for a retailer-led Stackelberg supply chain under cooperative and non-cooperative game settings over a multi-period planning horizon. The applicability of the proposed model is assessed using a case study involving a highly perishable product, sliced raw fish, in a supply chain comprising a regional seafood supplier and a local store belonging to a large national retail chain. The analytical results show that, in a cooperative setting, the EM with a consigned revenue-sharing VMI contract tends to achieve lower retail prices, larger stock quantity, improved channel efficiency, and increases in both retailer and supplier profits through an additional one-part tariff. Additionally, consumers benefit from lower retail prices and society benefits from increased overall channel profits in the cooperative channel and EM. Intensifying industrial competition and growing deployment of advanced information science and technology has prompted upstream and downstream entities to reorganize their supply chains to enhance efficiency and synergy through collaboration. However, coordinating and managing upstream suppliers and downstream buyers is challenging in vertically decentralized supply chains because participant decisions are based on different variables and ignore the profits or actions of other channel participants (Jeuland & Shugan, 1983). Effective coordination and cooperation in participant decisions is essential to achieve satisfactory results. For example , in the supplier–retailer–consumer channel, retail prices are higher if decisions of non-cooperative decentralized channel participants are made in a game-theoretical setting than if they are made cooperatively. Furthermore, the resulting decrease in stock level reduces overall channel profit. Additionally, supply chains are dynamic systems that evolve with changing customer demand and supply chain relationships. Even if demand is known, the planning process must still consider how changes in prices, trends, promotions , and other factors influence demand and cost parameters (Simchi-Levi, Kaminsky, & Simchi-Levi, 2008). Nevertheless, most enterprises realize that effective supply chain management (SCM) can increase profits by optimizing supply chain coordination and cooperation. Effective SCM requires approaches for efficiently managing and interconnecting dynamic and complex supply and demand networks from the end user through …